Older people typically carry less debt than younger people because people tend to lose debt as they get closer and retire. But in recent decades, each cohort of seniors has been more in debt than the last.
“There is a group of seniors in financial trouble,” said Annamaria Lusardi, an economist at George Washington University. “They are very exploited; they are carrying high-cost debt. They were contacted by debt collectors. They won’t enjoy their golden years. “
Dr Mudrazija and her co-author, Barbara Butrica, a senior researcher at the institute, used data from the National Health and Retirement Study and calculated that in 1998 about 43% of Americans over the age of 55 were in debt, a median of $ 40,145. By 2016, about 57% were in debt and more – a median of $ 62,784, adjusted for inflation.
The proportion whose debt accounted for 30 percent of their total assets had risen to nearly 45 percent, and the proportion whose debt-to-asset ratio had reached a troubling 80 percent nearly doubled, to 15 percent.
Although seniors with any debt were more likely to encounter health problems, the type of debt mattered, second I studypublished by the Boston College Center for Retirement Research.
Secured debts, such as mortgages and other home loans, are backed by one asset: housing. That debt has increased among older borrowers as property prices have soared and interest rates have remained low. “It is less and less the norm for people to pay off their mortgages before they retire, the traditional model,” said Dr. Mudrazija said.
But secured debt seemed less harmful to health than unsecured debt such as overdue credit card balances, student loans, and medical payments, which usually charge higher interest rates. About 24 percent of senior debt was unsecured in 1998; by 2016, the percentage had risen to 35%.